As the world embraces sustainability as a priority, businesses find themselves at the forefront of the ongoing shift towards a more responsible future given the increasing trend of mandatory climate-related reporting across several countries.
In line with these global trends, the Australian Government plans to implement mandatory climate-related financial reporting requirements for companies operating in Australia for FY25. The aim of these requirements is to improve transparency, accountability and comparability while enabling businesses and investors to make more informed decisions.
The Government has released the most recent proposal for the upcoming reporting requirements. The latest consultation period expands on the government’s prior discovery consultation, with submissions for that period recently closing in July. While the details are still being refined through the consultation process, much of the forthcoming requirements are clear and it is important for businesses to familiarise themselves with these new obligations.
Key components of the reporting requirements
Applicability: The reporting requirements will be applicable to large companies that meet certain thresholds. The thresholds will be determined based on factors such as existing reporting requirements (e.g., under the Corporations Act, NGERS), revenue, value of assets and/or number of employees.
Scope: The aim is for the Australian requirements to align with international reporting frameworks and standards (e.g., ISSB, TCFD) to ensure consistency and facilitate global benchmarking. Businesses will be required to report on their greenhouse gas emissions (include scope 3 emissions), climate-related metrics and targets, transitional and physical risks and opportunities and governance strategies.
Timeframe: The reporting obligations are expected to be implemented in a phased approach based on size of company thresholds. Companies will be given a one-year grace period prior to reporting on scope 3 emissions. Other reporting requirements are also phased based on complexity of response (e.g., qualitative scenario analysis to inform disclosures is expected in the first instance, increasing to quantitative scenario analysis over time).
What are the advantages?
While to some mandatory reporting may feel like a burden, it is important to consider the broader benefits.
Mandatory reporting creates improved transparency, allowing businesses to demonstrate their commitment to sustainability while building trust with stakeholders. This increased transparency also enables informed decision-making, both for the business itself as well as potential investors, and encourages the integration of sustainability considerations into business strategies. Investors are increasingly looking to allocate their resources towards sustainable companies. Mandatory reporting provides an opportunity for businesses to attract investors and / or customers by showcasing their sustainability performance and long-term resilience.
Lastly, early adoption can position businesses as leaders, differentiating themselves from competitors and potentially capturing new market opportunities.
How to prepare for compliance?
To effectively navigate the upcoming reporting requirements, Australian businesses can start taking proactive steps today by:
- Becoming familiar with the global reporting frameworks and guidelines upon which the Australian guidance will be based.
- Evaluating existing data collection and management systems to ensure they cover the necessary information for reporting (e.g., scope 1, scope 2 and scope 3 emissions).
- Starting to integrate climate considerations into decision-making (e.g., addressing emissions reduction, supply chain sustainability or physical climate risk).
- Engaging with stakeholders around sustainability commitments to promote collaboration.
- Enlisting support from subject matter experts when ready.
Our global team of subject matter experts support businesses around the world in preparing for and responding to climate-related financial reporting and we’re ready to support Australian businesses locally.
